In a landmark 6-3 decision, the Supreme Court of the United States overruled the doctrine of Chevron deference, which had been a hallmark of administrative law for the past four decades. Under the Chevron doctrine, courts deferred to a federal agency’s interpretation of an “ambiguous” statute, so long as the agency’s construction was deemed to be reasonable – even if the court believed that the agency’s construction was not the best reading of the statute.
Federal agencies have relied on the Chevron doctrine since it was adopted by the Supreme Court in 1984 to successfully defend a wide range of regulations that today govern virtually all aspects of the national economy. The Court’s decision marks a seismic shift in how reviewing courts analyze the actions of federal agencies and will have the effect of curtailing agency capability and influence across regulated industries.
What the Court’s decision says
In the decision by Chief Justice Roberts in the companion cases of Loper Bright v. Raimondo, No. 22-451 and Relentless v. Dep’t of Commerce, No. 22-1219, 603 U.S. ___, (June 28, 2024), the Court held that the Administrative Procedures Act (APA) requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the statute, or the rules and regulations promulgated to give it effect, simply because a statute could be considered ambiguous.
Under the Court’s decision, federal agencies will have less latitude to fill statutory gaps or ambiguities left by Congress. Also, agencies’ interpretations of federal statutes – reflected in promulgated regulations and issuances of formal guidance – will be subject to greater scrutiny by courts. This could deter agencies from issuing detailed and specific regulations and industry guidance, potentially to the detriment of the regulated entities themselves. The decision is expected to usher in a dramatic increase in litigation challenging agency actions, both past and future, and will result in more uncertainty as companies operate in highly regulated industries.
This heightened scrutiny is not limited to newly issued regulations. An opinion issued by the Supreme Court only days later, Corner Post, Inc. v. Board of Governors, No. 22-1008 (July 1, 2024) established that the APA’s six-year statute of limitations for challenging an administrative rule is not tied to when the rule was promulgated but instead to when the injured party was injured by the rule. As a result, agency rules that are decades old may be challenged based on new purported injuries and would not have the benefit of the now-defunct Chevron deference during that challenge. And although the majority opinion in Loper Bright and Relentless did not call into question prior cases that relied on the Chevron framework – cases that are still ostensibly subject to stare decisis – it did acknowledge that any challenger who provides “special justification” may prevail in overturning a prior decision that had relied on Chevron.
Key takeaways from the decision
In overruling Chevron, the Court emphasized that it is the unique role of the courts to state what the law is. According to the Court, Chevron defied the command of the APA that “the reviewing court” – not the agency whose action it reviews – is to “decide all relevant questions of law” and “interpret...statutory provisions.” 5 U.S.C. § 706. Moreover, the Court pointed out that “[c]ourts...routinely confront statutory ambiguities in cases having nothing to do with Chevron” and that in such circumstances, “[c]ourts…do not throw up their hands,” but rather utilize traditional tools of statutory construction to resolve statutory ambiguities and arrive at the single, best meaning of the statute. Slip op. at 22, 603 U.S. __. Indeed, the Court observed that “agencies have no special competence in resolving statutory ambiguities. Courts do.” Slip op. at 23, 603 U.S. __.
Although the Court rejected the government’s argument that Congress must generally intend for agencies to resolve statutory ambiguities because agencies have subject matter expertise regarding the statutes they administer, the Court acknowledged that “[i]n an agency case in particular, the court will go about its task with the agency’s ‘body of experience and informed judgment,’ among other information, at its disposal. Slip op. at 25 (quoting Skidmore v. Swift & Co., 323, U.S. 134, 140 (1944)). That is, “although an agency’s interpretation of a statute ‘cannot bind a court,’ it may be especially informative ‘to the extent it rests on factual premises within [the agency’s] expertise’” – i.e., a factor that “may give an Executive Branch interpretation particular ‘power to persuade, if lacking power to control.’” Slip op. at 25 (citation omitted).
Potential implications
The Court’s decision has many potential implications for industry stakeholders based on how the government agencies react to the decision, including:
- May chill agencies from promulgating detailed, industry-specific or wide-reaching rules, regulations, industry guidance or legal interpretations of the federal statutes they were created or directed by Congress to enforce.
- May lead to challenges of long-standing agency rulemakings, guidance or interpretations upon which regulated entities may have been relying (e.g., FDA approvals or exemptions from licensing requirements).
- May cause agencies to take more time to issue regulations, particularly those that could cause controversy or impose significant costs to those within the regulated industry.
- May result in an increase in the promulgation of state regulations to fill the gaps, which would create more of a patchwork approach for purposes of compliance with multiple – sometimes contradictory – state laws, rules, and regulations.
- May create greater disparity in statutory interpretations across jurisdictions, which could complicate the ability of market participants with nationwide or global businesses to comply with competing legal and regulatory rules and obligations.
- May favor the use of clear and specific statutory language, to the extent clarity is achievable through the efforts of Congress and collaboration among the various stakeholders.
Potential opportunities
There are potential opportunities for industry stakeholders in a post-Chevron environment, including:
- More opportunities to challenge rules and regulations from agencies that overburden regulated industries, such as by imposing unreasonable costs to comply with applicable laws and regulations, through over-enforcement or a "piling-on" of several regulatory agencies in levying civil monetary penalties to settle a regulatory investigation.
- Potential benefit from working with lawmakers on clear and specific language in legislative drafting, which would allow for greater industry input.
- More opportunities to influence and support approaches that benefit regulated industries, whether by submitting comments to proposed rules or through amicus briefs in litigation, which help persuade a court in the post-Chevron landscape.
Client Alert 2024-149
